Saturday, July 4, 2009

TTC was supposed to be self-sustaining

". . . The Conference Board report yesterday produced two stunning streams of numbers (See graphs). Over the last 20 years or more, depending on data availability, productivity in rail transport increased 3.6% per year, while rail prices dropped 2%. Air transport productivity jumped 2.2% per year while prices fell 0.9%. Trucking productivity gained 1.8% while prices fell 1.4%.

The common themes in air, rail and trucking over the last three decades were deregulation, privatization and competition. Public transit enjoyed none of the above. As a result, over roughly the same period, public transit productivity dropped 1.2% each year and end-user prices increased 1.75% a year. Canadians, in other words, paid more and got less from their public transit operations.

The report, titled "The Productivity Performance of Canada’s Transportation Sector: Market Forces and Governance Matter," paints a dismal picture of public transit nationally and especially in Toronto. Public transit’s share of total trips in Toronto declined five percentage points in the 15 years prior to 2001. While it has picked up since, the recovery is modest.

The report speculates what might have happened if public transit were subject to some of the competitive pressures that drove improvements in rail and air travel. If productivity in public transit had remained stagnant between 1986 and 2006 — instead of declining 1.2% — then “this would have meant that transit fares in real terms would have risen by 15% rather than the 60% that they actually rose over the 20-year period.”

Transit unions and city officials have long resisted opening their public transit systems to competition. While there are a few exceptions, the systems are still operated as locked-down monopolies, with legislation that prevents any one from operating even a competitive mini-bus service within city limits. Also missing is competitive tendering for services.

Outright privatization of public-transit operations would also be an opportunity to increase productivity and service. The main benefit would be to convert bloated politician-run organizations into more commercial business forms. In Toronto’s case, the transit commission is literally run out of the offices of politicians.

Some people don’t seem to mind if public transit is a fiscal and productivity disaster. After all, they say, public transit delivers what the Conference Board report calls “positive social-economic externalities.” These include the usual claims to less congestion and a cleaner environment. Even if these benefits exist, that is no reason to run a financially destructive system. Rail transport also produces similar external benefits, but still managed to improve productivity and cut prices.If nothing else, the Conference Board report should serve as a reason for higher-level governments to pause before they continue shipping billions of dollars into operations and structures that are obviously dysfunctional. Continuous declines in productivity and rising fares is no formula for future success."

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Roman Bobak wrote in "Remember the good oldTTC? ", (National Post, published Jul.4, 2009):

"Re: Transit Needs Ideas, Not Money, Terence Corcoran, June 26.

It is interesting how transit in Toronto has become politicized and subsidized as a social program.The precursor to today's Toronto Transit Commission (TTC) was incorporated in 1920 by an act of Ontario's legislature as a public utility to assume the ownership and administration of public transportation in trust for the city. The city voted to take over the expired franchise of the privately run Toronto Railway Company, whose 30-year agreement with the city dated from 1891.

This new commission was to be an independent corporation, separate from the city, protected from political interference. City council would appoint commissioners, and council would rule on the commission's capital-borrowing requests. Council members were not eligible to be appointed as commissioners.

The province formed this commission with the idealistic provision that it would be completely self-sustaining through the earnings it derived from services -- an astounding concept in today's world. This safeguard was meant to protect taxpayers from directly subsidizing the utility's capital or operating expenses. The commission was supposed to provide "service at cost." It was supposed to "guarantee investment while eliminating profit." The fare-box was supposed to provide all the revenue.

Somewhere along the line these ideals eroded, morphing into the voracious, byzantine entitlements of today's TTC monopoly."